How Can A Mortgage Broker Help You When Purchasing A Commercial Property?
If you wish to purchase a commercial property and are requiring finance, it’s best to consider obtaining a mortgage broker to help with the process. Mortgage brokers are financial specialists who are trained in securing commercial loans. A broker can help you find the best interest rates and loan terms, allowing for a smooth loan application process.
A mortgage broker plays a liaison role, whose main purpose is to:
1) Understand you and your business/position and what you are looking to achieve (financially);
2) Present possible finance solutions that need factoring in such things as rates, fees, and bank policy to ensure the best deal is obtained;
3) Deal with the lender on your behalf from start to finish;
A mortgage broker will usually:
- Guide you through changes to policies and regulations
- Clarify changes to rates and product specifications
- Help navigate major lenders’ offers as well as weighing up against smaller lenders and find you the best deal
- Help to tailor your application to look the most attractive to lenders, while staying within the best interests of your financial situation and business future
Thinking of purchasing commercial property?
If you’re a small or medium enterprise (SME) that is operating your business from a physical premises (warehouse/factory/office/shopfront) under a rental arrangement, you may be considering purchasing a property of your own to operate out of.
When’s the best point in the process to engage a broker?
If you’re considering purchasing a commercial property, we recommend engaging with a broker well ahead of time to ensure the purchase is indeed feasible and you have access to the best deal available.
Just as an accountant would, a broker views your business from a forward projection. They help you to plan up to a year or two ahead, weighing up structures and operations to access cash to support a mortgage.
How will a lender assess your mortgage application?
1. Character test. Have you got a clean credit check? Have you met all their existing liabilities, for example, your loan or rent repayment?
2. Equity or security. A bank will typically lend up to 60 to 80 percent of what the property is worth (depending on the property). In most cases, you may need cash or other supporting security to go into the transaction.
3. Income and debt. Generally, if you’re a self-employed client, the lender will seek out a few years’ financials, to ensure there is enough income and profit to support the loan. If the business is in growth mode, they may also consider projections or interim financials prepared by an account.
It is these 3 elements AS Mortgage Partners can greatly assist you with to show you what might be possible.
How do commercial interest rates compare with residential?
Commercial lenders typically don’t have set rates for commercial loans, rather they will determine the interest rate on the strength of the client and the metrics of the transaction. For instance, a transaction that might have a lower loan to value ratio (LVR) might naturally attract a lower interest rate.
How does unsecured lending work for commercial loans?
In the absence of property security (ie unsecured), the lender may support your business based on the strength of the balance sheet, the financial performance of the business, and your financial history.
Because some major lenders are a little more conservative with this, we have seen the rise of many unique business lenders who offer alternate funding solutions for a quick and easy cash injection into your business.
What about borrowing inside a self-managed super fund (SMSF)
Several years ago, all the major lenders stopped lending inside SMSFs completely. However, there are numerous options still available in this space (for both commercial and residential property purchases).
Our clients often express their difficulties in finding these lenders themselves, and thus we are here to help identify and guide this entire process.
Buying commercial property in super is a strategy many of our clients have taken (after receiving appropriate advice) and we are open to discussing how a lender might look at your position and investment strategy.